Hey, everyone! It’s certainly been an interesting few weeks in financial markets. As I record this video in March 2020, U.S. stocks are in a bear market, the first “official” bear market since 2009, though there were plenty of interruptions along the way. The proximate cause of this bear market is the coronavirus and associated economic disruption.
But this video applies to bear markets regardless of the cause… and I imagine that I’ll share it again in the future.
Amazingly, U.S. stocks went from all-time highs to a bear market in just 16 trading days. Even 1987’s bear market actually took 8 weeks to arrive after all-time highs!
And now we have sudden virus experts pontificating how many might get sick and die, and then extrapolating the economic impact, and then making predictions about stock markets. Never mind that those connections are tenuous at best in the short-term.
It’s also amazing to see “long-term” investors try to sell stocks now or at least stop buying them, and then predict which month markets will bottom.
Guess what! It’s all irrelevant! You could perfectly guess the market bottom this time and invest all of your money at the perfect moment, and it wouldn’t affect the outcome of your financial plan in any meaningful way!
The more likely scenario is that you capitulate and sell after steep, short-term losses and then, despite all the uncertainty, the extreme fear subsides and stock values rise. All while you are in cash having locked in your losses. And maybe you react quickly and get back in and the impact to your financial plan isn’t that bad. Or, like many after the financial crisis, you wait years.
You can have a PHD in the coronavirus and that won’t help you.
So here is what we do know. Picking the bottom isn’t going to do much for your financial plan. And you’re almost guaranteed to get that wrong, anyway.
We also know that the successful investor is one who has and executes upon a financial plan. The failed investor reacts to the news of the day. Riding out this historic decline is how investors will earn the premium returns of equities when the firestorm of terror burns itself out and the permanent advance resumes.
So, stop watching CNBC and continue following your financial plan that’s based on your long-term objectives, not what’s going to happen over the next few weeks or months. And if you don’t have a plan, send me a message.
Thanks for watching!
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Remember, the topics discussed in this video are for informational purposes only and that past results do not guarantee future performance. If you would like to discuss your financial situation, please email me at Derek.Merkler@Parsonex.com.
Advisory services offered through Parsonex Advisory Services, Inc., 8310 S.Valley Hwy, Suite 110, Englewood, CO 80112. 303-662-8700.